compensation. employee’s perspective what compensation do you seek? direct money indirect benefits
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Compensation
Employee’s Perspective
What compensation do you seek?
Direct
Money
Indirect
Benefits
Employer’s Perspective
What do you compensate?
Job:
• Responsibility
• Critical function
• Job content
Individual Characteristics:
• Ability
• Training
• Education
Employer’s Perspective
What factors influence your compensation policy?
• Supply and demand skills• Unions• Ability to pay• Cost of living increases
• Strategy
• Government (FLSA, min. wage)
Influence of Equity
Internal
External
Market wages
Perceived equity
Develop a Job Hierarchy
A. Job Evaluation
1. Preliminary planning
2. Select a plan
3. Develop the plan
4. Evaluate jobs, NOT PEOPLE
Factor 8: Decision Making / Supervision Required
1st Degree (36 points)
Limited decision making by the incumbent. Progress of work is checked by others most of the time, and/or 60-90 percent of activities are defined by other than incumbent.
2nd Degree (89 points)
Routine decision making bases on specific criteria. Progress of work is often checked by others, and/or 40-60 percent of activities are defined by other than incumbent.
3rd Degree (112 points)
Significant decision making based on established guidelines and experience. Progress of work is check by others some of the time, and/or 25-40 percent of activities are defined by others than the incumbent.
4th Degree (180 points)
Extensive decision making based on broad policies, procedures, and guidelines. Progress of work is seldom checked by others, and/or less than 25 percent of activities are defined by other than the incumbent.
Example of One Factor in a Point Factor System (Complexity/Problem Solving)
Level Point Value Description of Characteristics and Measures
0 0 Seldom confronts problems not covered by job routine or organizational policy; analysis of data is negligible. Benchmark: General secretary, switchboard / receptionist.
1 40 Follows clearly prescribed standard practice and demonstrates straightforward application of readily understood rules and procedures. Analyzes noncomplicated data by established routine. Benchmark: Statistical clerk, billing clerk.
The mental capacity required to perform the given job as expressed in resourcefulness in dealing with unfamiliar problems, interpretation of data, initiation of new ideas, complex data analysis, creative or developmental work.
Example of One Factor in a Point Factor System (Complexity/Problem Solving) (cont’d)
Level Point Value Description of Characteristics and Measures
2 80 Frequently confronts problems not covered by job routine. Independent judgment exercised in making minor decision where alternatives are limited and standard policies established. Analysis of standardized data for information of or use by others. Benchmark: Social worker, executive secretary
3 120 Exercises independent judgment in making decision involving nonroutine problems with general guidance only from higher supervision. Analyzes and evaluates data pertaining to nonroutine problems for solution in conjunction with others. Benchmark: Nurse,
accountant, team leader
Example of One Factor in a Point Factor System (Complexity/Problem Solving) (cont’d)
Level Point Value Description of Characteristics and Measures
4 160 Uses independent judgment in making decisions that are subject to review in the final stages only. Analyzes and solves nonroutine problems involving evaluation of a wide variety of data as a regular part of job duties. Benchmark: Associate director, business manager, park services director.
5 200 Uses independent judgment in making decisions that are not subject to review. Regularly exercises developmental or creative abilities in policy development. Benchmark: Executive director.
Pricing Jobs
"The acceptability of job evaluationhinges in large part on whether theresults are consistent with the rankingof the same jobs in the external labormarket."
Pricing Jobs
Jobs that are relatively stable in content and found in many organizations
A. Use key or benchmark jobs
Compare your internal analysis to external wages
B. Conduct wage survey to examine external wages
Pricing Jobs
C. Use points from job evaluation as a predictor
Use predictor to determine wages for non-key positions
Non-key positions: jobs that have no similar “comparison job” outside of the organization
Develop a Pay Structure
A. Pay on the basis of individual jobs or grades?
B. Utilize single rates or a rate range?
Inequities
Comparable worth
Salary compression
Pricing Managerial and Professional Jobs
Not easy because there are fewer quantifiable factors
Managers are often compensated for long term performance
Are executives overpaid?
Evaluate People Not Jobs
Skill Based Pay
Skill-Based Compared to Job-Based StructuresJob-Based Knowledge-Based
Pay Structure Based on job performed Based on skills possessed by the employee
Manager’s focus Job carries wage Employee carries wageEmployee linked to job Employee linked to skill
Employee focus Job promotion to earn Skill acquisition to earn greater pay greater pay
Procedures required Assess job content Assess skillsValue jobs Value skills
Advantages Pay based on the value Flexibility performed Reduced work force
Limitations Potential personnel Potential personnel bureaucracy bureaucracyInflexibilities Cost controls
Financial Incentives
"The basic aim of an incentive should beto encourage good performance bylinking performance and rewards, andthis in turn requires valid, accurateperformance appraisals.”
Incentives for Production Employees
Piecework
Group incentive plans
Attendance
Annual bonus
Other Incentives for Mangers, Executives and
Other Employees
Stock options
Long-term incentives
Organization Incentive Plans
Profit sharing plans• ESOP – Employee Stock Options Plan• Cost savings plan
SCANLON and Gainsharing
Potential Incentive Plan Problems
Worker doesn’t believe that plan will lead to rewards.
Unfair standards – too high or unattainable
Changing standards – obtain top management commitment to maintain standards
Recommendations
1. Ensure that efforts and rewards are directly related.
2. Incentive rewards are understandable and calculable.
3. Use accurate and effective standards.
4. Guarantee those standards.
Performance Evaluation
Performance Measurement Purposes
A. Administrative decisions• Promotion
• Training
• Compensation
• Transfer, demotion, and separation
Performance Measurement Purposes
B. Employee feedback and development
• Roles
• Strengthens E P and P O relationships• Allows behavior change
Performance Measurement Purposes
C. Evaluations of policies and programs
• Selection and promotion decisions
• Aiding in validation of selection tools
• Helping to determine if programs are effective
(e.g. training)D. Defense of policies
• Use to show job relatedness (performance)
Performance Measurement Issues
A. Identifying performance dimensions
• Most jobs are multi-dimensional
• Use job analysis to assess performance• Errors similar to job analysis
B. Establish performance standards
• Determine legitimate standards
• Don’t set standards too high or low
Performance Measures
A. Comparative methods
1. Ranking
2. Forced distribution
3. Problems with comparative evaluations:• No indication of potential performance• Little specific feedback• No feedback about where to improve
Performance Measures
B. Absolute methods1. Trait rating scale
• Central tendency problems• Doesn’t capture specific behaviors
2. BARS (Behaviorally Anchored Rating Scales)• Complex and costly
• Not applicable to a broad group of jobs• Avoids contamination and deficiency errors3. MBO – set for individuals, not jobs
Measures of Physical Output
Administrative Challenges
A. Components that influence the performance appraisal process
1. Appraiser (rater)
2. Appraisee (ratee)
3. Method
4. Purpose of evaluation
5. Motivation to appraise
Administrative Challenges
B. Rater errors1. Unreliability
2. Leniency
3. Severity
4. Central tendency
5. Recency
6. Halo
Administrative Challenges
C. EEO• Not only for your selection
• Show that method isn’t discriminating
• Validate performance appraisal procedures
Trends in PA Research
1. Focused on the accuracy of appraisal and improving method.
2. Focused on rater errors and reduction of errors.
3. Current focus: cognitive processes and interpretation and evaluation of performance.